The Crypto trading market tends to be much more volatile than the FX trading market, however the latter is known for its share of volatility. Cryptos such as BTC/USD can move 3-5% in a day, which is very rare for FX, such as USD/JPY. FX pairs are typically influenced by central bank action, comments, and regular macroeconomic data and usually, no central bank allows its currency to move in a disorderly manner for long unless there is significant policy change. As there is no regulatory control over Cryptos by central banks and they’re not legal tender, Cryptos can be very volatile, even more than commodities.
Major differences between Crypto and FX:
- Cryptos such as BTC/USD can move 3-5% or even 20% or more in a day or within few days, while FX pairs such as USD/JPY usually moves 0.3/0.5% in a day or a maximum of 2-5% in a few days or weeks. For example: USD/JPY made a high of 112.22 in February 2020 (pre-COVID) and made a low around 102.58 in January 2021, a movement of around -8.60% in almost 12-months. BTC/USD made a COVID low around 4001.0 in March 2020 and subsequently made a high around 64374.00 in April 2021, a gain of almost +1510% in a span of 14months.
- In CFD forex trading, a trader can open a buy or sell deal on the price movements of a base currency against a quote currency (like USD/JPY), while in CFD Crypto trading, a trader can open a buy or sell deal on the price movement of digital (intangible) assets against a currency (like BTC/USD), assuming Crypto is not a currency in any form or legal tender.
- Due to huge volatility, Crypto trading has less or zero leverage (100% margin) against high leverage for FX trading.
- Crypto prices tend to fluctuate on news of regulatory development, institutional acceptance, and wallet scams or hacks unlike FX, which moves on economic data and central bank policies or announcements.
- The Crypto market is open 24/7 (for selected brokers/CFD providers), but the FX market is open 24/5, except national holidays.
- Crypto trading is restricted in many countries, unlike FX trading.
- Global FX trading volume is much higher than Crypto trading.
- Generally, the forex market is controlled by USD movement, followed by EUR, JPY, and GBP; i.e. major FX pairs are USD/JPY, EUR/USD, and GBP/USD, while the Crypto market is dominated by BTC followed by ETH; i.e. BTC/USD and ETH/USD.
- Generally, FX policies are controlled by the central bank and government, which does not take any knee-jerk decision nowadays, thus FX trading can be more predictable than Crypto trading due to a lack of effective regulation.
- Forex trading as CFDs can be suitable for intraday swing trading, as prices normally gyrate within a predictable range, say 30-50 pips (day range); thus FX trading is of interest to CFD traders if they can employ proper analytical skills such as technical and fundamental analysis.
- The forex markets, unlike the crypto trading markets, can be moved by underlying macro-economic news including economic data, central bank policy actions and comments, domestic politics and policies, and geopolitics.